Morning Hog Market Report

February hogs closed slightly higher on the session yesterday day after choppy and two-sided trading. The market rose to the highest level since November 1st due in large part to a jump in pork cut-out values on Friday afternoon and the outlook for the cash markets to find a near-term bottom. A sharp break in corn, a rise in the US dollar and weakness in equity and metal markets were seen as pressuring hog prices as many traders were in a long liquidation mode due to macro demand fears for the global economy. Packer margins remain strong so any developing signs of tightness from packers could result in a rising cash market. Currently, supplies have been ample and packers have an easy time putting together large slaughter levels. Some traders feel that a base of demand is being built for large supplies level so when supply seasonal declines into early 2012, there may be a tendency for the market to lift higher. The CME Lean Hog Index as of November 17th came in at 83.89, down 60 cents from the previous session and down from 87.08 the week before. The estimated hog slaughter came in at 432,000 head yesterday. This was up from 430,000 head last week and up from 431,000 head a year ago as this time. Early indications for the kill on Saturday are near 350,000 head to 360,000 head as indications of a slaughter level this large for a weekend was thought to have given the cash market some underlying support. Pork cutout values released after the close yesterday came in at $89.91, down 27 cents from Friday and down from $90.07 the previous week.

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